Facebook on Tuesday reported revenue that missed Wall Street estimates and stalling user trends during the third quarter. Shares were up in premarket trading Wednesday, however, as investors had apparently prepared for the worst.
The social-media giant earned $1.76 a share, beating the $1.47 that was expected by analysts. Its revenue grew 33% year-on-year to $13.73 billion but missed the $13.8 billion that was anticipated.
Facebook said it had 2.27 billion worldwide monthly active users in the third quarter, including 1.49 billion daily active users, up from 2.23 billion and 1.47 billion in the previous quarter. Its average daily users in the US and Canada, however, have flatlined since the the first quarter at 185 million.
The company also said it would invest more aggressively and called for operating-expense growth of 40% to 50% in its 2019 guidance.
Analysts across Wall Street were relieved that users didn’t flee the social network in droves after a string of scandals. But they have mixed opinions about Facebook’s long-term outlook.
Here’s what Wall Street is saying about the quarter:
Goldman Sachs — ‚Better than feared‘
Price target: $195 (from $205)
Facebook’s results „were better than feared both in terms of 4Q18 guidance commentary as well as their outlook on expense growth in 2019 and beyond,“ Heather Bellini at Goldman Sachs said.
„Management guided revenue growth to sequentially decline by mid to high single digit percentages, compared to last quarter when they guided revenue growth to decline by high-single digit percentages in both 3Q and 4Q.“
She continued: „Importantly, the company updated its calculation methodology for MAUs and DAUs in the quarter ‚to exclude certain data signals that were previously misclassified as user account activity‘. Excluding the impact of this adjustment, DAUs would have been 15 million higher, MAUs would have been 9 million higher.“
RBC Capital Markets — ‚Facebook still has many growth levers left to pull‘
Price target: $190 (from $225)
Facebook is „one of the most ‚underlevered‘ internet companies,“ the RBC analyst Mark Mahaney said. „Facebook still has many growth levers left to pull, not least of which is video advertising.“
He added: „Facebook has, so far, effectively addressed one of the most significant overhangs from its IPO days, the lack of Mobile monetization. Mobile Ad Revenue is a material part of the overall Ad Revenue mix (92%).“
„Facebook currently drives EBITDA margins in the mid-40%s. An outlook for increased operating expense investment should drive these down, but we think that increased investment is actually a positive at this point in the company’s growth.“
Jefferies — ‚Not as spooky as feared, but ghosts remain‘
Price target: $200
„Not as spooky as feared, but ghosts remain,“ the Jefferies analyst Brent Thill said.
„Growth is decelerating, yet 2019 seems to be a pivot point with investment stabilizing,“ Thill added. „However, the bulk of the investment and deceleration will be accounted for and we view the investments as prudent for long term sustainability.“
He continued: „Facebook connects more than 2 billion people from around the world to nearly 6 million advertisers with best in class data and targeting capabilities delivering high quality and relevant advertising to its loyal userbase.“
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Source: business insider